Types Of Donations That Are Tax-Deductible
Let’s discuss the most common types of tax-deductible charitable donations that qualify in the eyes of the IRS. Before putting one on your federal tax return, it’s important to seek the assistance of a tax professional to ensure it qualifies.
Cash Donations
You can donate cash, whether it’s mailing a check or paying using your credit card. Other cash donations include payroll deductions, automatic withdrawals from your bank account and simply using your debit card.
To claim the deduction, verify whether the IRS considers it a qualifying organization and whether the organization can offer proof of your donation. You should be able to get a receipt or invoice – outlining the date and amount you donated – plus other relevant information about the nonprofit organization, such as its tax ID number.
Noncash Donations
The term “noncash donations” tends to be vague, so it’s important to check the IRS website or consult a reputable tax professional for clarity if in doubt about whether your donation falls into this category. Essentially, noncash donations are items that aren’t cash or a cash equivalent (such as a check). These donations can include furniture, artwork and other items of value.
To deduct noncash donations, you’ll need to have a third party (most likely the organization you donated to) give a fair market value and provide a description of what you donated. You’ll use this information in your tax return. Other paperwork you’ll need includes relevant information about the organization you donated to and when you donated.
Also, caps differ for non-cash gifts to private foundations versus public charities. The cap is currently 30% of the taxpayer’s AGI for private foundations, while the limit is 50% for public charitable organizations.
Appreciated Property
Appreciated property includes noncash items that can go up in value, such as stocks, bonds, profitable businesses and physical assets – like gold that fluctuates in price. As with other charitable donations, you’ll need to make donations of these property types to a qualifying organization.
When you donate appreciated property, make sure you receive a receipt or invoice of what you donated and its current market value. That’s the amount you’ll need to use when itemizing your tax return.
In some cases, you may have to get an appraisal of the property from a qualified professional. Typically, you’ll only need one if the property is over a certain amount. Check with the IRS or a tax professional to determine whether an appraisal is necessary.
Items
Typically, donated items include noncash donations such as household goods, used clothing or new toys. Items must be in good, used condition, and the charity or nonprofit must accept the items for them to count as a charitable donation.
The organization will offer you a receipt of the fair market value, though you may have to provide this value. You can consider the average price on the items you’ve donated, but some charities offer guidance to establish the fair market value.
Some items, such as cars, will require extra paperwork. For instance, if the charity sells your car and it’s worth over $500, the charity will need to send you Form 1098-C within 30 days of the sale.
Out-Of-Pocket Expenses For Volunteer Work
You may be able to deduct some expenses you incur for a qualified organization. Examples of such expenses include mileage, parking, tolls and public transportation costs if you drive while doing volunteer work.
You may also be able to deduct any uniforms (including the purchase and care of them) if you need to wear them while volunteering. If you have students or children living with you under a qualified program, you may likewise be able to deduct the amount you spend on them.
Since the type of paperwork or proof can vary, it’s best to seek the help of a qualified tax professional.
